Intangibles

Question 1

Note on Valuation of intangible assets

Answer 1

1. Finite life intangible assets are reported at cost less amortization and impairment.
2. Infinite life intangible assets are reported at cost less impairment

Question 2

How should a patent be amortized?

Answer 2

A patent should be amortized over the shorter of its estimated life or remaining legal life.

Question 3

When is a long lived asset impaired?

Answer 3

A long lived asset is impaired when the carrying amount is greater than the fair value and if the carrying amount is not recoverable. ( the fair value would be recoverable but the difference would not be.)

An impairment loss would then be recognizes for the amount of the difference between the carrying value and the fair value.

Question 4

How to treat a permanent impairment?

Answer 4

When a permanent impairment has occurred, the book value is reduced with a credit to accumulated depreciation.
Depreciation of the remaining value is taken over the remaining life.